IPO
Kazakhstan’s Astana Motors plans IPO in 2009
(SRI) - Astana Motors, part of the Astana Group holding, is preparing for an initial public offering in 2009, said Astana Group President Nurlan Smagulov in an interview with Interfax.
Arawak Energy issues additional share on LSE
Arawak Energy, a Canadian oil company with oil and gas assets in Kazakhstan, will conduct an additional issue of 400,000 shares on the London Stock Exchange (LSE) next week, the company said in a statement.
At the beginning of July, Arawak Energy completed a listing on the KSE, placing 182,244,500 shares at a starting price of 127 pence per share. Its shares closed at 114 pence on July 14.
Arawak’s shares are also listed on the Toronto Stock Exchange (TSE).
Sunkar Resources raised £33.6 million in IPO
(Silk Road Intelligencer) - Sunkar Resources raised £33.6 million ($67.2 million) in its IPO on the AIM in London this morning with the stock offering priced at 120p per share.
The Kazakh phosphate miner opened at 123p and closed at 110p.
“This IPO is an important milestone in the development of Sunkar and it is a clear indicator of investors’ faith in the attractiveness of our asset base and Kazakhstan,” said chief executive Serikjan Utegen in a press release.
“We look forward to developing the mine during the course of the year and are determined to develop Sunkar into one of the region’s leading phosphate production companies.”
Canaccord Adams is the nominated adviser and joint broker to the company, and GMP Securities Europe is acting as a joint broker.
ENRC’s lays out plans for life after Kazakhmys
Just three months after listing on the London Stock Exchange and buoyed by declining global metal production, which has caused demand and consequently prices for its products to soar, Kazakhstan’s largest listed company ENRC shot into the FTSE 100 index.
ANALYSIS: Kazakhstan’s stock market - the missing link
Although the Kazakhstan Stock Exchange (KASE) is the most developed in Central Asia, its development has been slow compared to the country’s banking sector. It now faces an uphill struggle due to intense competition from foreign exchanges for Kazakhstan’s highly attractive pipeline of IPOs.
Kazakh IPOs in London: Past and Future
Currently, ten Kazakh companies are listed on the Main Board of the London Stock Exchange (LSE), all of which have conducted their IPOs in the last three years. The post-IPO performance of their shares on the exchange may an indicator of the trends and prospects of the Kazakh economy.
All Roads Lead to London
From Biznes i Vlast:
In the next two years, IPO’s will again become a hot topic for Kazakh issuers, says Arman Moldakhmetov, Almaty-based managing director of the PBN Company, a consultancy. According to him, mid-size companies and banks are well advised to consider Russian stock exchanges as a source of capital.
How do you assess the prospects of conducting IPO’s by Kazakh companies in the near future?
We think that initial public offering is a process that will actively develop not only in Russia but also in Kazakhstan. The results of 2007 showed that of the four Kazakh companies conducting IPO’s, ENRC was the largest issuer. We believe that within the next two years, not only companies from the financial sector but also other companies will seek financing on international exchanges — although financial institutions will continue playing the most significant role. Specifically, we expect increased activity in the agricultural sector and companies with activities in the infrastructure, engineering and transportation sectors. These segments of the economy, we think, are most attractive for international investors and most in need of financing.
However, specifically the ENRC’s initial public offering on the London Stock Exchange (LSE) stirred up a wave of criticism…
The answer to your question is the size and liquidity of the stock market in Kazakhstan, and also the cost of financing. In London, the money is cheaper. I don’t think that if ENRC conducted its offering on, say, the RFCA (Regional Financial Center Almaty), it would be able to attract the same funding as it did on the LSE. Everything is a matter of liquidity, which we lack. In Russia, for example, the liquidity is greater, and therefore, the stock market works there. It is also a matter of trust by the population, which is supposed to buy the shares. The offering of shares by Kazakhtelecom has shown that only well informed people were buying the stocks while the majority of population simply did not know why they should buy them. Many actually suspected that it was some type of a scheme like those pioneered during the coupon privatization. Therefore, I think that ENRC chose the right approach. They needed money - and they attracted it in the cheapest possible way. This possibility just does not exist in Kazakhstan today.
Alliance Bank’s Debut on LSE
As Kazakhstan’s economy keeps on growing at a fast pace, more and more Kazakh companies turn to Western exchanges as sources of financing. Alliance Bank, Kazakhstan’s third largest bank and its largest retail lender, is the latest newcomer to join the club of British-listed companies from this former Soviet Union country. Yesterday, on July 17, its major shareholder, the Almaty-based holding company Seimar Alliance Financial, raised $704 billion in its listing on the LSE.
Alliance whose common shares have already been listed on the Kazakhstan Stock Exchange (KASE) placed 50.28 million GDR’s, each representing-one thirtieth of a share, to offer around 17.4 percent of the bank. The sale price implies a market value of around US$4.05 billion. Seimar sold the GDR’s at $14.00 each which is the bottom of the indicated range of $14.00 and $17.30. During the first day of trading the shares lost 6.7 percent and closed at $12.80.
Alliance is the third Kazakh bank that listed its GDR’s on LSE. Kazkommertsbank has listed its shares in London in November 2006 and Halyk Savings Bank followed in December 2006. Two other larger Kazakh banks are currently considering secondary offerings in London (Bank TuranAlem and Bank CenterCredit) while Unicredit, the Italian banking group, agreed to buy another Kazakh bank, ATF Bank, for $2.2 billion.
While Alliance’s GDR’s were listed at the low end of the estimated range, the share price indicates a huge premium to its peers. The issue price was a multiple of 4.8 times book value of $2.91 per GDR as of March 2007, a 78 percent premium to Kazkommertsbank which trades at just 2.7 times book value of $8.269 per GDR.
Alliance has been growing aggressively over the last several years and moved from being a tenth largest retail lender in Kazakhstan at the end of 2004 to being the leader today. To fuel this aggressive growth in the near future, the London listing was a logical step. However, the fast growth brings several risk factors that need to be considered.
First, the often discussed and highly praised growth of the banking sector in Kazakhstan is fueled mainly by retail credit and lending to construction companies and real estate developers. The product and services range of most Kazakh banks, and especially small and medium-size banks, is not wide, and the risks tend to be concentrated in certain areas. For Alliance, retail lending represents a total of 45 percent of its loan portfolio which makes it vulnerable to both systematic and unsystematic risks.
As most Kazakh banks, Alliance strongly depends on international capital markets as a source of capital, and as a result, is vulnerable to exchange rate, refinancing and interest rate risks. In addition, as the bright economic situation in Kazakhstan and the strength of the Kazakh tenge (especially compared to its neighbors) can be attributed to the high oil prices, at least as much as to President Nazerbayev’s economic policies, the banks are highly vulnerable to macroeconomic shocks like a sudden drop in the price of oil that would almost certainly take the tenge down as well.
Second, as already mentioned, Alliance’s growth was mainly thanks to the aggressive increasing of its market share in Kazakhstan’s retail lending. Today, its share represents 20 percent of the Kazakh market. However, as the volume of loans and the speed with which they are approved increase, so do the risks. Alliance uses a proprietary credit ranking system that allows it to grant or reject a retail loan in a matter of minutes. This, while allowing the processing of a large number of loans, naturally leads to a degradation of quality of the loan portfolio. As of the end of 2006, the non-performing loan of the ration was 3.6 percent. While this is an increase from the year before, it is mainly the result of Alliance’s strategy to focus on retail lending which is both more lucrative and riskier, and it is difficult to assess the effectiveness of the credit issuance system. The fact of the matter is that as the bank is fighting for market share, it cannot afford to cherry-pick worthy borrowers and the number of non-performing loans is almost certain to increase. As the retail loan portfolio makes up almost half of the entire loan portfolio of the bank, this may cause difficulties in the future. In addition, it should be noted that the growth occurred during a period of highly favorable macroeconomic conditions which may or may not last.
Kazakhstan has certainly been a success story, especially compared to its neighbors, and it attracts attention of not only oil and gas and mining companies but increasingly of portfolio managers around the world. However, it remains to be seen whether its almost double-digit growth of the past several years was thanks to the market-friendly policies of the presidential administration or merely to the high prices of oil and gas. The debut of Alliance Bank on the London stock exchange shows that investors are growing cautious of risky deals whatever the success story may be.
